Several Key Focus Areas, pulling from Margin of Safety and Common Stocks, Uncommon Profits and the Most Important Thing
- Typically would ask: What’s wrong with it? (if presented an undervalaued asset)
- Need to assess the market’s apetite for risk, and stance towards risk aversion (with respect to the capital market line)
- ObserveĀ core / systemic business weakness versus market over-reactions: why are companies undervalued? When will they rebound?
- Constantly evaluate: what is the business worth?
- Recall that markets areĀ infefficient (institutional constraints)
- Understand credit cycles
- New product initiatives are a good time to continue increasing observations of a company
- Evaluate management incentives
- Evaluate market and relevancy of products vis a vis market
- How sensitive are customers to pricing?
- What will competitors do in reaction to different courses of action?
- What is the volume outlook for a business?
- Analytical observe market sentiment for industry and individual company
- Observe: capitalization, financial position, breakdown of sales, competitors, insider ownership, margins